US shale oil producers, having slashed fat from 2015 budgets after a 50% drop in crude prices, risk cutting to the bone next year as they cut spending further and get ready for a prolonged downturn.
Top shale companies including Devon Energy Corp, Continental Resources Inc and Marathon Oil Corp this week released preliminary 2016 plans for capital spending that may fall by double digits, Reuters reported.
The cuts, following reductions of 30% to 40% by many in the industry this year, would leave budgets at a fraction of levels seen during the height of the shale boom that lasted to mid-2014. Lower costs and improved productivity would allow them to hold shale oil production largely flat. CEO of Chesapeake Energy Corp said 2016 spending would be “cut in a meaningful way” at the Oklahoma-based company.
Devon Energy Corporation said it expects to spend $2 billion to $2.5 billion on exploration and production next year, down from about $4 billion this year. Marathon Oil is cutting about $1 billion from its projections.
Oasis Petroleum Inc, which produces oil in North Dakota, said it expects to spend $350 million in 2016 on drilling and completion of new wells, roughly $200 million below what it plans to spend for those services this year.
Continental Resources, North Dakota’s second-largest oil producer, said it will need to spend $1.5 billion to $1.6 billion next year to maintain output of roughly 200,000 barrels of oil equivalent per day. That would be less than half the roughly $3.4 billion the company expects to spend this year.
